Millions of Americans are thousands of dollars in debt, due in part to economic woes of recent years. But there are ways to manage your debt and boost your financial strength.

How to think of debt

In an ideal world, you would be able to pay for everything without taking out a loan. Of course, some items are just too expensive for all but the super rich to buy with cash. Most people wouldn't be able to buy a house without getting a mortgage loan, of course.

Similarly, most people cannot buy a car outright so they take out auto loans, which generally don't carry very high interest rates.

On the other hand, some loans do require borrowers to pay high interest rates, such as payday loans. Some credit cards also carry high interest rates on monthly balances.

While loans can be a useful way of acquiring important items such as a house and car, they also can become a burden if you're not careful about how much money you borrow and what types of loans you're taking on.

Should you consolidate your debt?

You may have received offers to consolidate your debts to reduce your interest rates. That can be a good choice in some instances, but before you agree to a consolidation, experts advise that you consider these issues:

Understand the terms. Will a debt consolidation loan provide lower rates, but extend the time to repay the loan beyond the original loans? Also, consider whether the loan has additional fees or collateral requirements and comparison shop to find a loan that will help you reach your goals without extra costs or risks. For instance, BBVA Compass' Express Personal Loan has no collateral requirements or application fees and offers an interest rate discount for setting up auto debit payments.

Don’t avoid the original issue. Some people think that once they've done a consolidation, they've addressed their debt issues. But unless they have taken a close look at their spending and understood why they've taken on debt for items possibly not worth the financial burden, they haven't really made the important changes required for a stronger financial footing.

Will it simplify your budgeting process? Talk to a financial advisor about whether having one lump payment per month vs. paying multiple bills separately will help you avoid late fees, improve your credit score, and simplify budgeting.

DIY Debt Management Plan

Look at the cause of your debt. Some people get into debt due to circumstances beyond their control, such as a job loss or high medical bills. Others are impulsive spenders who always want to have new and expensive items. Assess what's caused you to build up more debt than you'd like.

Find areas where you can trim spending. If you take a hard look at how you're spending money, you might find ways to save that you hadn't considered. Using any freed-up money to pay off your debts will serve you well in the long run.

Figure out which debts to pay off first. If you have piled up charges on a few credit cards, you're likely to be paying different interest rates on the cards. So first try to pay off everything you owe on the card with the highest rate, then the next highest on down the line.

If you're still having trouble

It takes discipline and knowledge to get on top of your finances when you face a lot of debt. If you feel like you're not getting anywhere despite your efforts, you might consider contacting a reputable credit counseling service for help. Most of these groups are nonprofit organizations. Look for ones that are clearly affiliated with a university, a housing authority, or a governmental agency - they should be able to provide low-cost or even free services.

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